Initially, the move was seriously criticised by local industry when the decision was taken in April this year, citing sufficient domestic urea inventory and high international prices.
However, now the government's decision seems very timely as domestic urea production is on decline after the gas supply to urea plants, especially the world's largest single-train urea plant set up by Engro at Daharki, was disconnected because of a gas shortage.
"We were not expecting gas shortage during the Kharif season. Therefore, we did not appreciate the import decision," a representative of a local producer said. When the government suspended gas supply, it showed that the government was aware of the impending gas shortage, he added.
"Despite the decline in world prices, urea import will cost millions of dollars to the government, gradually depleting foreign exchange reserves, followed by high imports and decline in inflows," sources said.
"Urea prices are currently hovering near $410 per ton level." Now, the import of 300,000 tons of urea would cost between $135 and $140 million to the national exchequer, they said.
Urea prices on international front declined by more than $100 during the past month, hovering between $400-$415 per ton (cost and freight) against $520-530 per ton level (C&F) in May this year.
So far, the Trading Corporation of Pakistan (TCP) has finalised two deals for the import of 200,000 tons. The first deal was finalised, on May 21, for the import of 100,000 tons of urea at $522.86 per ton with M/s Gavilon Fertiliser LLC. The second deal for 100,000 tons matured on June 26 with M/s Transammonia AG of Switzerland at $411.77 per ton. Cumulatively, $93.5 million has so far been spent on import of 200,000 tons.
In addition, third tender for contact of remaining 100,000 will be opened on July 12. The current decline in the urea prices will help reduce the import bill of urea, besides reducing the foreign payment burden on the government, they said.